Judge Christian R. Gullon, Case Number: 23PSCV03834, Date: 2024-06-26 Tentative Ruling

Judge: Christian R. Gullon, Case: 23PSCV03834, Date: 2024-06-26 Tentative Ruling

On December 11, 2023, Plaintiff VANESSA ROSE ARIAS filed suit against Defendants HYUNDAI MOTOR AMERICA (“Defendant” or “HMA”) and PUENTE HILLS HYUNDAI, LLC, a California Limited Liability Company d/b/a PUENTE HILLS HYUNDAI for violations of the SBA arising from Plaintiff’s 2021 purchase a 2022 Hyundai Santa Fe.

Defendant seeks to compel arbitration based on the Arbitration Agreement found in the warranty for the subject vehicle. The Arbitration Agreement states, in pertinent part:

If you purchased or leased your Hyundai vehicle in the State of California, you and we, Hyundai Motor America, each agree that any claim or disputes between us (including between you and any of our affiliated companies) related to or arising out of your vehicle purchase, advertising for the vehicle, use of your vehicle, the performance of the vehicle, and any service relating to the vehicle, the vehicle warranty, representations in the warranty, or duties contemplated under the warranty… shall be resolved by binding arbitration at either your or our election, even if the claim is initially filed in a court of law.

Here, Plaintiff’s dispute is based upon transactions covered by the Arbitration Agreement in HMA’s warranty (i.e., HMA’s warranty obligations). As such, any dispute or damages arising from these transactions, including those alleged in the Complaint, must be resolved by binding arbitration under the terms of the Arbitration Agreements. (Motion p. 4.)

In Opposition, Plaintiff advances three arguments: (i) HMA may not rely on the post-sale warranty booklet to compel arbitration and (ii) both arbitration provisions are procedurally and substantively unconscionable. The court disagrees on both points.

Plaintiff argues that she “was never notified of the existence of the post-sale Warranty Booklet, never mind any potential terms or agreements to arbitrate therein” and that “Plaintiff has never relied on the terms … to confirm the enforceability of HMA’s express warranty nor in alleging their statutory warranty claims under the Song-Beverly Consumer Warranty Act.” (Opp. p. 7.)

First, California law recognizes that a drafting party “[is] under no obligation to highlight the arbitration clause of its contract, nor [is] it required to specifically call that clause to [the nondrafting party’s] attention.” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th at 899, 914.) Even assuming some explicit notice about the warranty booklet, equitable estoppel applies to a written agreement containing an arbitration clause when a party must rely on the terms of the written agreement in asserting its claims as Plaintiffs are very clearly doing here. (Reply p. 7.) “A litigant may not assert claims based on a contract while simultaneously arguing that an arbitration clause in that contract is ineffective.” (Reply p. 7, citing Stiner v. Brookdale Senior Living, Inc., 810 F. App'x 531, 534 (9th Cir. 2020);[1] SM Tuscany, LLC v. Superior Court, 193 Cal. App. 4th 1222, 1239- 40 (2011).) As the District Court recently explained in Mendoza v. Hyundai Motor Am. (C.D. Cal. Dec. 15, 2022) 2022 U.S. Dist. LEXIS 226972, a plaintiff “cannot selectively ignore the Warranty’s arbitration provision while knowingly exploiting the Warranty’s benefits.” (Reply p. 8, fn. 7.) What is more, California law recognizes that a drafting party “[is] under no obligation to highlight the arbitration clause of its contract, nor [is] it required to specifically call that clause to [the nondrafting party’s] attention.” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th at 899, 914.)

Therefore, as it is disingenuous to allow Plaintiff to rely on the Warranty received the time of sale as a basis for this action but then avoid the binding arbitration provision in the Warranty by claiming there is no agreement to arbitrate thereunder, there is a valid arbitration agreement via application of equitable estoppel principle.

Plaintiff largely argues procedural unconscionability because the arbitration agreement was not identified nor incorporated by reference in the retail agreement. (Opp. p. 10, citing to Dougherty v. Roseville Heritage Partners (2020) 47 Cal.App.5th 93.) But, as noted by Defendant in Reply, Dougherty is factually distinguishable. There, the arbitration clause was inconspicuously buried at page 70 of the contract, and it permitted the defendant to modify the agreement on 30 days’ notice, and if the resident did not agree, they would be required to move out, and it also precluded the signors from pursuing punitive damages or attorney’s fees under the Elder Abuse Act.

Here, the facts are distinguishable on two fronts. First, Doughtery did not address equitable estoppel. (Reply p. 7.) Second, the arbitration provision here is fully conspicuous. Even if the booklet is 350 pages, the arbitration provision is set out in a separate section in the handbook, is identified in the Table of Contents, is clearly marked, not hidden, and not ambiguous. Thus, a purchaser reading through the Warranty Handbook to assess the scope of the warranties they were receiving at the time of purchase would as easily be able to find the arbitration provisions as the warranty for parts of their vehicle. (Reply p. 5.) Moreover, even as to arguments about substantive unconscionability, unlike the agreement in Doughtery, here, the agreement contains an explicit opt out provision, there is no restriction on recoverable damages, any limits on discovery will apply equally to HMA and Plaintiff, and HMA will pay for all arbitration costs except for the initial filing fee of $250. (Reply p. 7.)

Ultimately, should there be any doubts as to the enforceability of the arbitration agreement, any doubts “are to be resolved in favor of sending the parties to arbitration.” (United Transp. Union v. Southern Cal. Rapid Transit Dist. (1992) 7 Cal.App.4th 804, 808); see also Lamps Plus, Inc. v. Varela (2019) 587 U.S. __ [139 S.Ct. 1407, 1418] [“ambiguities about the scope of an arbitration agreement must be resolved in favor of arbitration.”]; Chiron Corp. v. Ortho Diagnostic Systems, Inc., 207 F.3d 1126, 1131 (9th Cir. 2000) [“little doubt that the dispute [was] subject to arbitration” where agreement covered “[a]ny dispute, controversy or claims”]; AT&T Technologies, Inc. v. Communications Workers of Amer., 475 U.S. 643, 650 (1986) [“only the most forceful evidence” can overcome contract enforcement.].)

Thus, absent meeting its burden to establish a defense by a preponderance of the evidence (Pinnacle Museum Towers Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 246-247), that leaves no doubts that the parties are to arbitrate the matter.

Based on the foregoing—as Plaintiff is suing upon a written contract that she assented to and she has failed to meet her burden of establishing both procedural and substantive unconscionability—the motion is GRANTED.

[1] The warranty explicitly states “This Binding Arbitration Agreement shall be governed by and interpreted under the Federal Arbitration Act, 9 U.S.C. sections 1-16.”